What Can You Purchase With FSA?

Flexible Spending Accounts (FSAs) are employer-sponsored benefit plans that allow employees to set aside pre-tax dollars to pay for eligible health care expenses. By reducing your taxable income and setting aside funds for essential medical needs, FSAs can provide valuable financial relief. However, to maximize the benefits of an FSA, it is essential to understand what you can purchase with your FSA funds. This comprehensive guide explores the variety of products and services that can be purchased with an FSA, offering insights into both traditional and less well-known eligible expenses.

Overview of FSA

Before diving into eligible purchases, let's briefly review the basics of what an FSA is and how it works.

1. What is an FSA?

   • An FSA allows employees to contribute a portion of their earnings to an account, which can be used to reimburse certain out-of-pocket health care costs.
   • Contributions are made on a pre-tax basis, effectively lowering taxable income.
   • FSAs have an annual contribution limit set by the IRS that may change annually.

2. How Does an FSA Work?

   • Funds take time to accumulate within your account according to your payroll schedule.
   • Eligible healthcare expenses can be reimbursed through this account.
   • Most FSAs have a "use-it-or-lose-it" rule, meaning funds not used by the end of the plan year are forfeited, though some plans offer grace periods or carryover options.

Common Eligible Medical Expenses

1. Prescription Medications

FSAs cover a wide range of prescription medications, including:

• Antibiotics
• Birth control
• Insulin
• Medications needed to treat chronic conditions such as asthma, diabetes, and heart disease.

2. Medical Devices and Supplies

Numerous medical devices and supplies are eligible for purchase with an FSA, such as:

• Blood pressure monitors
• Glucometers and test strips
• Thermometers
• Eyeglasses, contacts, and contact lens solutions
• Hearing aids and batteries

3. Co-pays and Deductibles

While insurance may cover a portion of your medical expenses, patients are often left with co-pays and deductibles. FSAs can be used to reimburse:

• Doctor’s office visits
• Specialist consultation fees
• Hospital stays
• Surgery and procedures

4. Dental and Orthodontic Care

Oral health is an essential component of overall health, and FSAs can be utilized for:

• Routine dental cleanings
• Fillings, crowns, and root canals
• Orthodontic procedures like braces or retainers

5. Vision Care

FSAs support a range of vision-related expenses, including:

• Eye exams
• Prescription eyewear
• LASIK surgery

Less Common But Eligible Expenses

Beyond the typical expenses, FSAs can cover a variety of other health-related services and products. These might be less known but potentially valuable for many individuals.

1. Acupuncture and Chiropractic Services

Alternative medicine is gaining traction, and several treatments are FSA-eligible:

• Acupuncture for pain management and other conditions
• Chiropractic adjustments

2. Mental Health Services

Mental health is a crucial part of overall well-being. FSAs can support:

• Counseling and therapy sessions
• Psychiatric care
• Substance abuse treatment programs

3. Reproductive and Family Planning

FSAs assist with family planning and related health needs, such as:

• Fertility treatments
• Prenatal vitamins (if prescribed)
• Breast pumps and lactation supplies

4. Specialty Health Programs

Participation in medically necessary programs can be FSA-eligible:

• Smoking cessation programs
• Weight loss programs prescribed by a physician

Frequently Asked Questions About FSA Purchases

Are Over-the-Counter Medications FSA-Eligible?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 expanded the scope of FSAs, making over-the-counter (OTC) medications and menstrual care products eligible without a prescription. Common OTC examples include:

• Pain relievers like ibuprofen or acetaminophen
• Allergy medications
• Menstrual pads and tampons

Can I Use FSA Funds for Dependents?

Yes, FSA funds can be used for medical expenses incurred by your spouse, dependents in your household, and, in some situations, adult children up to age 26.

What Happens If I Overcontribute to My FSA?

The IRS sets an annual limit on FSA contributions. If you accidentally contribute more, consult with your HR department as soon as possible to rectify this. In many cases, the excess will remain taxable.

What Happens to Unused FSA Funds?

While the “use-it-or-lose-it” rule traditionally meant losing unused funds, some employers now offer options:

• Grace Period: Spend leftover funds in the first few months of the next plan year.
• Carryover: Roll over a limited amount to the next year, per IRS regulations.

Can I Purchase Fitness Equipment with My FSA?

In general, fitness equipment and gym memberships are not FSA-eligible. However, if a doctor prescribes exercise equipment or fitness activities for a specific medical condition, those expenses may potentially qualify.

Example Table: Eligible vs. Non-Eligible Purchases

Below is a table summarizing some common FSA-eligible and non-eligible purchases to enhance clarity further.

Maximizing FSA Benefits

To make the most of your FSA, consider the following strategies:

• Plan Ahead: Review the eligible and non-eligible expenses at the beginning of each year to project your expected medical costs.
• Track Spending: Keep receipts and track your spending throughout the year to avoid unexpected surprises.
• Consult Resources: Leverage reputable resources like your HR department or FSA provider for questions about specific expenses.
• Evaluate Needs Annually: Your health needs may change, so reassess and adjust your contributions each year accordingly.

Flexible Spending Accounts are a valuable financial tool that, when used effectively, can provide significant savings on a wide range of medical expenses. By understanding what you can and cannot purchase with an FSA, you can maximize your tax savings and manage your healthcare expenses with greater ease. Always verify specific expenses with a professional to ensure compliance and avoid unexpected issues. Stay informed, plan carefully, and make the most of your FSA benefits.